MOP 6.00 Closing editor: Joanne Kuai
Beijing cuts borrowing costs on seven-day reverse-repurchase agreements
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Bad loans lead China’s banks to search for further capital
Las Vegas Sands wins trademark dispute Page 7
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Studio City Opens
Year IV
Number 907 Wednesday October 28, 2015
Publisher: Paulo A. Azevedo
Le Saunda to close two Hong Kong stores
At last. Studio City opened yesterday. The US$3.2 b Hollywood-themed venue rolled out the red carpet for Tinsel Town’s A-listers. Plus Cantopop royalty. Building great expectations, which Melco Crown Co-chairmen Lawrence Ho and James Packer unreservedly fuelled. In the latest test of Macau’s ability to attract non-gaming thrill-seekers. Receptive to interactive Batplane flight simulators, Fun Zone, fine dining, shopping malls and celebrity concerts and events. The resort complex also features 250 gaming tables, 1,600 hotel rooms and a figure-8 Ferris wheel Pages 8&9
Selective rebound The downward spiral in housing prices is ending. So says realtor Centaline. Residential property price drops are slowing according to its analysis of 14 major projects. But they’re mostly new-build. Financial Services Bureau data reveals a different story when overall average housing prices in Macau are considered. Decreasing 6.47 pct and 14 pct y-o-y in July and August, respectively
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Mild statistics Chinese industrial companies earnings fell last month. But are nevertheless recovering following a collapse in August. While unemployment hovered close to last month’s figures
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October 27
Name
%Day
Belle International Ho
+6.06
Want Want China Hold
+2.04
BOC Hong Kong Holdin
+1.57
China Mengniu Dairy C
+1.06
Hengan International
+0.91
Lenovo Group Ltd
-1.53
China Merchants Holdi
-1.64
Cheung Kong Property
-1.90
China Resources Powe
-3.78
Sino Land Co Ltd
-3.87
Source: Bloomberg
I SSN 2226-8294
Zero-sum game
Macau International Chartered Tourist Guide Association. They say Macau can follow the lead of Hong Kong’s Travel Industry Council. In setting reference prices for inbound tourists on package tours. A mechanism that helps tackle Mainland China’s ‘low-cost’ tourism quandary. Which once again has proved to be open to abuse
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Retail www.macaubusinessdaily.com
HSI - Movers
New brand campaign drives sales Clothing retailer Esprit’s retail turnover increased 9.1 pct y-o-y. Reaching HK$2.86 b (US$356.1 m) for the three months ended September 30. Accounting for 61 pct of the total. Attributable to its Autumn/Winter collection. And new brand marketing campaign
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October 28, 2015
Macau
Association: Macau can consider setting reference prices for package tourists The death of a Mainland tour visitor in Hong Kong last week resulting from an alleged forced shopping incident has raised concerns over China's low-cost tourism Stephanie Lai
sw.lai@macaubusinessdaily.com
after the legal amendment came into effect in 2013; but not long after, all sorts of legal loopholes surfaced,” she added. “For instance, some travel agencies [on the Mainland] convince clients to join a super-low tour and sign a contract that says they agree to join the shopping activities in the tour destination. The clients just sign them without giving much thought to whether these activities are worthwhile and reasonable,” the tour guide association head noted.
False docs
M
acau can follow the considerations of Hong Kong's Travel Industry Council in the setting of reference prices for inbound tourists travelling on package tours, a mechanism that helps the tackling of Mainland China's low-cost tourism as highlighted by the death of a Mainland tour visitor in Hong Kong last week resulting from mediating an alleged dispute over forced shopping, a local tourist guide association has remarked. Hong Kong Travel Industry Council chairman Michael Wu Siu Ieng said the council is considering the setting of reference prices for inbound tour group visitors, a mechanism that it wants to implement before the Chinese New Year holiday in 2016. Targeting Mainland visitors in particular, the setting will have to
have Chinese authorities handle the regulation of the tour costs, according to Mr. Wu. “I think Macau can also consider pushing a similar mechanism here in setting reference prices for visitors,” said Ms. Wu Wai Fong, president of the Macau International Chartered Tourist Guide Association. “Here we have yet to see a horrible incident like the death of the Mainland visitor in Hong Kong last week but we absolutely can undertake some precautionary practices to better protect the rights of tour visitors.” A package tour visitor from Heilongjiang Province was beaten to death last week after he tried to mediate in a quarrel between a fellow tour visitor and a tour guide who berated her for not making any purchase at a jewellery outlet in Hong Kong. The city's authorities are still
investigating if the case involved forced shopping.
Backdrop
The death of the Chinese visitor has highlighted the still common existence of the low-cost or ‘no-cost’ group tours organised on the Mainland, which charge unreasonably low fares from clients but usually result in forced shopping. An amendment to China's tourism law came into effect on the Mainland two years ago seeking to rein in the practice but has not had too much actual impact, Ms. Wu said. “Now, half of the Mainland package tours that come here are still organised in the format of the low-cost group or even the zero-fee group,” Ms. Wu said. “It's true that the malpractice of the zero-fee tours stopped for a while
Some Mainland Chinese travel agencies have also dodged laws banning zero-fee tours by submitting false documents to authorities: the agencies asked tourists attracted by the low-fare tours to sign false contracts that contain prices and itineraries deemed acceptable to authorities with an understanding that they will be changed later when the tour sets off, according to Hong Kong's The Standard. In an online notice published on Sunday, China's National Tourism Administration warned citizens that they may be held legally liable for joining tours that charge unreasonably low prices, adding that it is studying the relevant measures to deal with it. “This is a first step by the Chinese authorities to help rein in zero-fee tour issues, which I believe can play an important reminder to the public,” Ms. Wu told us. “But what's more important is that the Mainland public has to be better aware of this type of tourism product. They have to be more educated in looking at the price structures of the package tours,” she added. She also noted that unlicensed or even fake travel agencies on the Mainland have had a practice of luring visitors with super-low fare tours. In a tourism complaints review for 2014, the Sports and Tourism Administration of Shenzhen said most of the tourism complaints it received from residents were related to travel to Hong Kong, Macau and Southeast Asia. Of the 234 written complaints the administration received, 45.3 per cent or 106 cases were related to travels to Hong Kong and Macau. Of these 106 cases, two-thirds complained about the operation of fake travel agencies, according to the administration's data. Shenzhen authorities said in the review that tackling fake travel agencies is a major task for this year.
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October 28, 2015
Macau SAR residents permitted to join Shanghai housing fund The Shanghai Provident Fund Management Centre has allowed the residents of Macau, Hong Kong and Taiwan to join the Chinese city’s housing provident fund if they are employed by Shanghai employers, as well as having obtained working and residency permits there, according to Shanghai Daily. The employee and employer will pay 254 to 2,290 yuan monthly on a 50/50 basis for the fund if they agree to join. The money of the fund can be used for buying or renting a house, as well as paying property management service fees.
Realtor: Property market on upturn Centaline (Macau) Property Agency, based on its own index analysing the housing prices of 14 residences in Macau, says the spiral in housing prices is coming to an end Kam Leong
kamleong@macaubusinessdaily.com
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he downward trend of the city’s housing prices is softening, Hong-Kong based realtor Centaline (Macau) Property Agency Ltd. say, claiming the property market is even showing signs of a rebound. The property agency said yesterday that its Centa-Macau Climatic Index had reached 39.29 points for the third quarter of the year, suggesting the dropping rate of residential property prices had slowed, compared to 38.46 points and 16.67 points registered in the second and first quarter of the year, respectively. The index, analysing transactions of some 14 major newer residences in the territory, shows housing prices’ tendency to increase if it reaches more
than 50 points. On the contrary, when it registers below 50 points, it suggests a downward tendency. The realtor perceives that the increase in the index points for two consecutive quarters shows home prices are stablising. But it also noted that the local property market is still groggy as the index points were below 50 for the first three quarters of the year. In fact, agency director Jacky Shek Po Tak reckons the index could have reached higher points if there were no fluctuations in the stock market and scandals related to the city’s VIP gaming market, which have influenced the confidence of homebuyers.
‘Based on the Index, we can see housing prices are stably rebounding. We believe there is more room for home prices to increase, instead of continuing to drop. We anticipate the property market may bounce from the bottom,’ the agency predicts, adding the government’s special stamp duty charged to home sellers prevents housing prices registering sharp declines.
Town of two tales
The city’s Financial Services Bureau (DSF) has not yet released the average housing prices for September. However, the current available data of the government department shows the property market might actually be in downturn.
According to DSF, average housing prices for completed units in July and August were MOP77,568 per square metre, decreasing 6.47 per cent and 14 per cent compared to MOP82,936 and MOP91,100 for the second and first quarter of this year. The government’s data is based on all transactions made on completed units for the months, while the index of Centaline covers transactions on newer projects, such as Vella de Mar, La Cite and La Baie Du Noble in Areia Preta; Nova Taipa Garden, One Grantai, Nova City, Prince Flower City and One Oasis in Taipa or Cotai; and The Praia, One Central, L’Arc, The Residencia Macau and Green Island on other parts of the Peninsula.
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Macau
Esprit retail turnover up 9 pct
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lothing retailer Esprit Holdings Ltd. said its retail turnover had registered a year-on-year increase of 9.1 per cent in local currency to HK$2.86 billion (US$356.1 million) for the three months ended September 30, accounting for 61 per cent of the total. According to its filing with the Hong Kong Stock Exchange on
Monday, its total turnover for the period reached HK$4.67 billion, a slight decrease of 0.4 per cent yearon-year in local currency. The company said the turnover increase in the retail segment is attributable to its new collections for Autumn and Winter as well as its new brand marketing campaign. But the company’s turnover in
Asia Pacific decreased 3.6 per cent year-on-year in local currency to HK$629 million for the period. ‘[It] was mainly due to China, where we observe dampened consumer sentiment affecting our sales performance,’ the company wrote in the filing. Meanwhile, the retailer’s wholesale business totalled HK$1.78 billion
Le Saunda to close two Hong Kong stores
A
lice Lau, chief executive of Hong Kong-listed footwear retailer Le Saunda Holdings Ltd., told reporters yesterday that the company is closing two stores in Hong Kong starting next month, a move that will eventually reduce the Le Saunda footprint in
the market of Hong Kong and Macau to 14 by the end of February next year. The store reduction is planned amid a worse operating environment in the SARs market, said Ms. Lau in a press briefing on the company’s interim results. But the Le Saunda chief
executive said the company could consider opening stores again in Hong Kong and Macau again if it sees rental levels drop next year and an appropriate space is available. For the six months ended August 31, 2015 Le Saunda’s net profit for the interim period dropped 28.8 per cent year-on-year to 55.2 million yuan, according to the company’s latest filing. The company’s interim revenue rose slightly by 0.4 per cent to 755.8 million yuan, of which 7.4 per cent or 56.2 million yuan is derived from the stores in Hong Kong and Macau. Sales in Hong Kong and Macau represented a 26.6 per cent year-on-year fall in the interim period, when Le Saunda closed five stores in this market and hence brought down the store number to 16. The sales revenue generated in Macau stores alone in the period dropped 44 per cent year-on-year to 8.56 million yuan, the filing shows. S.L.
for the three months, a decline of 12.3 per cent year-on-year in local currency compared to HK$2.4 billion one year ago. Globally, Esprit has a total of 868 retail stores as at the end of last month, of which148 are in Germany, 193 in the rest of Europe, and 527 in Asia Pacific. K.L.
Belle International posts better interim earnings
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ootwear and sportswear retailer Belle International Holdings Ltd. reported a nearly 4 per cent increase in its net profit for the interim period ended August 31, 2015 on the back of stronger earnings in the sportswear and apparel business. The Hong Kong-listed retailer, which runs stores in both Hong Kong and Macau, said its net profit has increased by 3.9 per cent year-on-year to 2.16 billion yuan. The group’s revenue has also increased by 4.3 per cent to 18.56 billion yuan, mainly boosted by stronger sales in the sportswear and apparel business, according to the company’s interim results filing. The company’s sales revenue in the footwear business, however, declined by 5 per cent to 10.36 billion yuan in the interim period under worse same store sales.
Belle International operated 147 self-managed retail outlets in Hong Kong and Macau in the period. Divided by region, Belle International’s revenue in Hong Kong and Macau declined by 4.1 per cent to 486.3 million yuan. The Hong Kong and Macau market only represented 2.5 per cent of the overall revenue at 19.4 billion yuan, which is largely derived from Mainland China. Belle International’s company-owned brands in the footwear business mainly include Belle, Teenmix, Tata, Staccato, Senda, Basto, Joy & Peace, Millie’s, SKAP, :15MINS, Jipi Japa, and Mirabell. Distribution brands of the footwear brands mainly include Bata, Clarks, Hush Puppies, Mephisto, Merrell, and Caterpillar. Belle International sells sportswear brands including Nike, Adidas, PUMA, Converse and Mizuno. S.L.
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October 28, 2015
Macau opinion
Taxis over all
José I. Duarte Economist
U
Wynn Macau: Dore to close one VIP room
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ocal gaming operator Wynn Macau Ltd. has confirmed that junket promoter Dore Entertainment Co. Ltd. is closing one of its VIP rooms in the casino property this Saturday due to adjusting their business scale. On Monday, Business Daily reported that the junket company, following its former cage manager Mimi Chow having allegedly absconded with the company’s money, was closing two VIP rooms in Wynn Macau on October 31, according to our source. The gaming operator confirmed the closure plan of Dore, saying the VIP promoter is shutting down only one of its VIP rooms.
‘We can confirm that Dore will return one of their three junket rooms at Wynn Macau on 31 October, 2015. This is in accordance with Dore’s plan to scale down their business operations,’ the gaming operator said in a statement. Last month, depositors of the junket company claimed Dore had rejected their withdrawal of deposits placed with the company following the alleged cage theft. The amount involved in the case reached at least HK$520 million (US$64.8 million) according to the latest data released by the city’s Judiciary Police (PJ), based on 49 police reports. In addition, Hong Kong Chinese language newspaper Economic
Court: FAB trademark reserved for Las Vegas Sands
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he Court of Final Appeal has made the definite decision that Las Vegas Sands (LVS) will have the right to register the trademark of ‘FAB’, which stands for Fast Action Baccarat, according to a statement released yesterday by the Office of the President of the Court of Final Appeal. According to the statement, the trademark dispute dates back to October 2012 when LVS filed an application to register ‘FAB’ as a
trademark with Macao Economic Services (DSE) in the Macau SAR. In November 2013, Galaxy Entertainment Group (GEG) raised an objection to DSE and the authorities sided with GEG and rejected LVS’s application in January 2014. Thereafter, LVS lost its appeal at the Court of First Instance but won at the Court of Second Instance. GEG later appealed again to the Court of Final Appeal but lost, which means ‘FAB’ is now reserved for LVS.
Journal reported yesterday that junket operator Jimei International Entertainment Group Ltd. had closed one of its VIP rooms, Wynn International Club 3 (Macau) in Wynn Macau on Monday, as well as combining its International Club in Altira with the one in the City Of Dreams. Contacted by Business Daily, an independent non-executive director of Jimei, Kwok Chi Chung, denied the closure of the company on the phone yesterday, without further remarking. Meanwhile, Wynn Macau did not reply to our enquiries on the issue by the time this story went to press. K.L.
The Court of Final Appeal explained in the statement that its decision is based on ‘FAB’, as initials, lacks its own meaning and doesn’t represent any quality or feature of a product, whereas ‘Fast Action Baccarat’ will not be granted to them as a trademark because it is a symbol that represents a certain type of service or product. The court also indicated that the majority of people don’t even know the English name of the game, adding that any competition raised isn’t subject to the norms or registration provisions. In addition, the court denied processing GEG’s accusation that LVS’s behaviour had the intention of unfair competition and violated good business customs, saying that GEG failed to raise such reasoning at an earlier stage of the litigation process.
ber, the app-based service for car transportation, has started operations in Macau. That is possibly one of the most interesting bits of news of the week, which raises broader issues. Those less familiar with the subject may need a short explanation. Using the Uber app on your phone or tablet, you can request transportation from one place to another. Registered drivers – basically, anyone willing to do that –will answer the request and pick up and drive you, at prices usually lower than taxis. Uber will charge payments to your credit card, and the company will pay the driver. Of course, the service increases (in many cases, creates) competition to traditional taxi services. It is a new approach that is being resisted by taxi drivers all over the world. As a new business model, it is essentially unregulated and, in many cases, is likely to violate rules made under different social, operational and technical conditions. As is the case with many new technologies, it has the potential to disrupt older methods of doing things and to challenge installed interests. In Macau, it certainly touches on the taxi sector. It is a sector involved in various kinds of controversy, which compounds the sensitiveness of the issue. It is a sector that has a terrible reputation for quality of service and has been the object of several complaints over the years. It is known to disregard rules on picking up customers, and there are well-documented cases of illegal overcharging. Bar the occasional fine without visible effects on the overall situation, residents and visitors keep complaining and seem to have good grounds for those complaints. Moreover, competition seems artificially limited to shielding owners of the licences from would-be competitors thereby forcing a scarcity of the services. What should government do when faced with such circumstances? Rationally, they should carefully assess the advantages and disadvantages of the new technology, and its economic impact, including its benefits and costs, for all segments of the population. And then define an appropriate regulatory framework, one able to protect the wider interests of society and to increase the transparency of the economic agents involved. Almost as soon as the operation of the service was announced the government went public declaring it illegal and threatening a strict application of the law. The verdict could not be stronger. Three public departments, no less, were publicly instructed to go after the service providers. It even invoked that this new application will make fare abuses more common and argued that users’ interests will be less protected. No cogent explanation is provided for these assertions. Curiously, the press release comes directly from the press office of the Chief Executive and not, as might be expected, the department of traffic affairs, whence only silence emanated. Regardless, one thing is now clear. In the balancing between the interests of more competition and consumer choice, and the protection of established operators and interests, it seems clear where the weight of the government will be.
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October 28, 2015
Macau
Studio City officially opens, sp Hollywood glamour on the ter Actor Leonardo DiCaprio, from left, billionaire James Packer, Co-Chairman of Melco Crown Entertainment Ltd., film director Martin Scorsese, billionaire Lawrence Ho, Chief Executive Officer and Co-Chairman of Melco Crown Entertainment Ltd., actor Robert De Niro and filmmaker Brett Ratner stand for photographs during the news conference
Lawrence Ho comments on 4-star but claims Studio City is 5-star
Sec yet
Initially, Studio City was conceived and promoted by Melco Crown Entertainment as a 5-star resort. However, last month it was announced in Macau’s Official Gazette that the project had been downgraded to 4-star. While Lawrence Ho did not elaborate on the topic and the reasons behind it he said the decision was taken to help the local government. “Anybody that has been here experiencing the property, the hotels and non-gaming amenities, from an international standard will consider it beyond 5-star classification. But at the same time we are respectful of the government and its regulations… We did not want to put them in a difficult situation”, he said. “From their perspective we have done pretty innovative things, but rather than putting them in a difficult position we gladly lower ourselves to 4-star”. The CEO of the company put an end to the issue by claiming that Melco Crown is very proud to have the most Forbes 5-star facilities in Macau, mentioning the other properties of the company: Altira and City of Dreams.
Melc Cota land parce and resor Studi in th “O this p discu Lawr the s now and m “W grant to go Melc 40 p expla
Employees stand outside the Studio City casino resort, developed by Melco Crown Entertainment Ltd.
Business Daily | 9
October 28, 2015
Macau
prinkling rritory The new resort is targeting the mass market with management counting on the number of visitors to Macau exceeding 31 million in the coming years João Santos Filipe
jsfilipe@macaubusinessdaily.com
H
ollywood-themed Studio City is now officially open, with the goal of Melco Crown’s US$3.2 billion (MOP25.54 billion) resort to target the mass market through non-gaming amenities during the coming years. This objective was outlined yesterday in the press conference on opening day, which was attended by chairmen of the company Lawrence Ho and James Packer. “From day one, considering table allocation, the table cap and the annual growth limits imposed by the government, we knew it would be focused on mass market. When we received authorisation to install 250 gaming tables it was a no-brainer to us. We knew it was going to be all mass”, Lawrence Ho said yesterday during the event. “Melco Crown, as a company, steered away from VIP a long time ago. We are the second last operator relying on VIP of the six concessionaires”, he added. Initially, the company was hopeful it would receive 400 gaming tables, eventually being authorized to have 250 tables. But yesterday there were no signs of frustration with this decision. “If we had been grated 400 gaming tables, maybe there would have been a small portion for VIP. But we are where we are, and we are happy”, the son of Stanley Ho said. “We all know that there is a table cap and why the government needs to maintain that”.
Long term investment
While the company has invested US3.2 billion in this project, Melco Crown is now expecting that the number of tourists to enter the territory will surpass 31 million in the coming years. At a time when
gaming revenues has been declining, the operator’s investment in Macau stands at US$10 billion. “With this amount invested we are looking five or ten years ahead. The Hong Kong-Zhuhai-Macau Bridge will be a game changer. Also, with the completion of the Cotai Ferry Terminal and Light Transit Rail, Macau will be able to accommodate more than 31 million tourists”, Lawrence Ho stressed. “All the other five concessionaires have their money back by now, in terms of investment. However, we have reinvested a lot of it and we want to keep reinvesting”, James Packer said.
Non-gaming trend
During the Grand Opening press conference, one of the most mentioned topics by the chairmen of the company was the investment in terms of nongaming amenities. “I’m really proud that when the government issued the six gaming licences, they expected us to build non-gaming attractions. That is what we did with City of Dreams and now with Studio City. We’ve tried really hard to do what the Macau Government wanted”, the Australian billionaire explained. “We are the undisputed top investors in terms of non-gaming attractions. We have really brought it to another level. Studio City is more about interactive attractions that the entire family can share”, Lawrence Ho highlighted. Studio City has 1,600 rooms divided into two towers, the result of a partnership between Melco Crown Entertainment, which own 60 per cent of the project, and local company New Cotai LLC, which has a 40 per cent stake.
cond Phase of project t to be planned
co Crown Entertainment and New ai LCC, the concessionaires of the where Studio City is situated, have a el of land that has yet to be developed that is attached to the integrated rt. There is the possibility of expanding dio City but this will only be considered he future. Our focus and attention was on opening property the best we can, and have ussions on that after the opening”, rence Ho said after being asked about subject. “What we have built until stands on its own as one of the best most innovative integrated resorts”. We built [on] two-thirds of the land ted for Studio City. There is one third o. But the interest in Studio City of co Crown is 60 per cent. The other per cent belongs to New Cotai”, he ained.
James Packer: Cinema and casinos are similar industries
Lawrence Ho, Co-Chairman and CEO of Melco Crown Entertainment
Studio City is an integrated resort themed around Hollywood and the film industry culture. Yesterday, James Packer explained why in his view these two industries are a perfect match. “The casino and movie businesses are more similar than people realise. What you do when you go to watch a movie is you pay money to change the way you feel. That is what our [casino] businesses do because people come here because they’re hopeful they will feel good. We change the way people feel and they pay for that”, Packer said. The Australian billionaire also revealed that the movies Casino and Ocean’s Eleven, which are related to the gaming industry, are among his favourites.
James Packer, Co-Chairman of Melco Crown Entertainment
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October 28, 2015
Greater China State Council appoints, removes officials The State Council, China’s cabinet, announced a reshuffle of senior government officials yesterday. Chen Zhaoxiong and Feng Fei were named vice ministers of Industry and Information Technology, while Wang Qinfeng and Gu Ju were appointed deputy administrators of the State Administration of Taxation. The State Council appointed Li Baorong head of the National Government Offices Administration, removing Jiao Huancheng from the post. Jiao was also relieved from the post as deputy secretary-general of the State Council. Tan Tieniu was appointed vice president of the Chinese Academy of Sciences, replacing Shi Erwei.
Industry core earnings fall in September Unemployment statistics remained stable at 4.05 percent in the third quarter
Unemployment
Huawei says Q3 smartphone shipments jump China’s Huawei Technologies Co Ltd said third-quarter smartphone shipments jumped 63 pct year-on-year, helped by stronger sales of higher-end handsets as it seeks to shed its image as a budget device maker. Shenzhen-based Huawei, the world’s third-biggest smartphone supplier by volume, shipped 27.4 million smartphones globally in the quarter ended Sept. 30, the company told Reuters on Tuesday. Deliveries climbed 81 percent and 98 percent in China and Europe respectively from a year ago. About a third of the quarterly shipments were mid- to high-end models, it said, up from 25 percent a year earlier.
Ping An insurance forms property fund
Ping An Insurance (Group) Company of China, the country’s second largest insurer, has formed a US$600 million fund to invest in U.S. real estate together with Blumberg Investment Partners. The portfolio consists of logistics assets across the United States, the companies said in a joint news release, and the two plan to invest a further US$400 million. The move is part of a growing trend by cash-rich Chinese insurers to invest in developed Western markets, particularly in real estate. Hilton Worldwide Holdings said it would sell Waldorf Astoria hotel to Chinese insurer Anbang Insurance Group.
Zhongwang denies dumping accusations Zhongwang Holdings, the world’s second largest producer of aluminium extrusions, denied U.S. accusations it had evaded import duties, saying its export business had been conducted in strict accordance with rules in China and overseas markets. The accusations are the first formal U.S. move to curb China’s aluminium exports, which U.S. producers say have grown steadily over the past year. In a petition filed with the U.S. Commerce Department, the U.S. Aluminium Extruders Council asked the government to clarify that pallets and 5050 alloys are subject to antidumping and countervailing duties introduced in 2011.
The industrial profits data comes after China’s central bank cut key interest rates and eased bank reserve requirements on Friday, following a GDP reading of 6.9 percent in the third quarter, beating expectations but still the lowest growth rate in decades. The NBS said that the milder reading was thanks to a recovery from sharp losses due to currency fluctuations, which it blamed for much of the August plunge. Chinese firms continue to struggle with high debt levels - in particular in heavy industry and inefficient stateowned enterprises - with producer price deflation effectively raising their real debt repayment burden.
China created 10.66 million new jobs for urban residents in the first nine months
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rofits earned by Chinese industrial companies fell 0.1 percent in September from a year earlier, data from the statistics bureau showed yesterday, levelling after a record 8.8 percent collapse in August. Industrial profits - which cover large enterprises with annual revenue of more than 20 million yuan (US$3.15 million) from their main operations - fell 1.7 percent in the first nine months of the year compared with the same period a year earlier, the National Bureau of Statistics (NBS) said on its website. “Even though the rate of industrial losses narrowed in September, given that downward pressure on the industrial economy continues, the industrial profit outlook is still
not optimistic,” the NBS said in the statement. The NBS added that core business revenues had declined 0.5 percent at industrial firms, the first time in “many years” it had done so. Many firms in the survey are heavy industrials seen as playing a lesser role in China’s future growth. But as the economy moves away from infrastructure investment toward services and consumption, the big industries’ poor performance could still drag on recovery because of their high debt. “Persistent slowdown...could feed into financial distress in heavilyindebted manufacturing firms, which we fear potentially cascading into the banking system,” ING economists wrote in a research note.
On the other hand the registeredunemployment rate in China’s cities stood at 4.05 percent at the end of September, slightly up from 4.04 percent in June, official data showed yesterday. China created 10.66 million new jobs for urban residents in the first nine months, Li Zhong, spokesperson for the Ministry of Human Resources and Social Security, told a press conference. The government wants to create at least 10 million new jobs and hold the unemployment rate below 4.5 percent this year. There were 109 positions for every 100 job hunters in the third quarter, indicating a generally-balanced job market, Li said, citing a survey conducted by the ministry across 100 cities. In the first nine months, positions at 30,000 monitored companies dropped by nearly 5 percent. Li assured that this was a small loss and mainly affected sectors struggling with overcapacity or environmental problems, including the coal, steel and chemical sectors. He forecast the job market will remain steady in the fourth quarter and next year, as government measures bear fruit, including numerous cuts to bank’s reserve requirement ratio and interest rates. Reuters and Xinhua
PBOC eases policy via repos as rate liberalization shifts focus The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, dropped two basis points to 2.27 percent Justina Lee
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hina cut borrowing costs on seven-day reverse-repurchase agreements used to add funds to the banking system for the first time since August as it seeks to revive growth in the world’s second-largest economy. Yesterday’s move follows last week’s reductions in benchmark interest rates and the amount of cash banks must set aside as reserves after data showed the economy expanded at the slowest pace in the third quarter in more than six years. The People’s Bank of China (PBOC) also removed a cap on what lenders can pay savers on Friday. The PBOC sold 10 billion yuan (US$1.6 billion) of the reverse repos at 2.25 percent, 10 basis points lower than the previous
auction on October 22, according to traders. "We expect open-market operations to become more proactive and no longer limited to one-off adjustments in response to changes in deposit rates," Guosen Securities Co. analysts led by Shanghai-based Dong Dezhi wrote in a research note yesterday. A yield curve measures interest rates on securities of various maturities. Steepening typically occurs when short-term rates fall faster than longer-term ones. The PBOC reduced its one-year lending rate to 4.35 percent from 4.6 percent effective Saturday, while the one-year deposit rate was cut to 1.5 percent from 1.75 percent. Reserve requirements for all banks were lowered by 50 basis points, with
an extra 50 basis-point reduction for some. "Now that the deposit rate is entirely liberalized, the market is more focused on the rates in openmarket operations," said Cici Wang, an analyst at Citic Securities Co. in Beijing who expects the seven-day repo rate to fall to about 2.2 percent. "Deflationary pressure became more marked this year.” The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, dropped two basis points to 2.27 percent. The yield on China’s 10year sovereign bonds fell three basis points to 3.01 percent, the lowest for a benchmark of that maturity since January 2009. Bloomberg News
Business Daily | 11
October 28, 2015
Greater China
Industrial & Commercial Bank of China Ltd, China Construction Bank Corp and Bank of China Ltd HK, raised US$33.3 billion last year
Mainland banks search for more capital as bad loans pile up China's listed commercial lenders raised US$57.6 billion last year to bolster their core capital according to Thomson Reuters data Matthew Miller and Umesh Desai
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ounting bad loans are running down Chinese banks' capital buffers, forcing them to turn to investors for fresh funds despite raising a record amount last year. Commercial banks are issuing expensive preference shares as well as convertible and perpetual bonds to shore up their capital bases, even after 2014's bumper issuance when lenders raced to meet new regulatory requirements. But with bad loans up 30 percent in the first half of 2015 according to China's banking regulator, doubts are growing about the ability of some banks to withstand the economic slowdown. "China is facing a systemic credit crisis," said Jim Antos, banking analyst at Mizuho Securities in Hong Kong. "Chinese banks, until mid 2014, were able to cope with deterioration of loans. It seems that has changed." Banks' operating profit margins also are expected to worsen, following the central bank's decision on Friday to cut interest rates for the sixth time in less than a year. China's listed commercial lenders raised US$57.6 billion last year to bolster their core capital according to Thomson Reuters data. But they may need to raise an additional 553 billion yuan (US$87.07 billion) if a slowdown in the economy pushes the ratio of non-performing loans (NPLs) from 1.5 to 4 percent, according to calculations by Barclays' banking analyst Victor Wang. Huaxia Bank Co is the latest lender
to get approval from the Chinese Banking Regulatory Commission (CBRC) to issue 20 billion yuan in preference shares, a bank official told Reuters News. The economic downturn and structural adjustment have caused "overdue loans to increase quickly, increasing pressure on credit risk management of the entire system," the official said. Preference shares pay investors a fixed dividend taken from a company's after-tax profits, and are a more expensive form of financing than bonds, which pay out interest before taxes. Huaxia Bank will follow other Chinese mid-tier banks that recently announced fundraising plans, including Huishang Bank Corp, China Everbright Bank Co. and China Citic Bank, which said last month that it had approval to sell up to 350 million preference shares.
The big four
China's biggest issuers of high quality tier 1 capital over the last 18 months have been its "Big Four" commercial banks, which are expected by analysts to report this week that their percentage of non-performing loans increased this quarter. The CBRC has ordered the country's systemically important lenders to hold, by 2018, a minimum of 9.5 percent in core tier one capital, which is made up of equity and retained earnings. Currently most of them hold capital above that level, though they all have programs under
way to raise more to ensure they can comfortably stay above that target. Industrial & Commercial Bank of China Ltd, China Construction Bank Corp and Bank of China Ltd HK, raised US$33.3 billion last year, mainly by selling preference shares and subordinated debt, Thomson Reuters data shows. The total value of bad loans at Chinese banks surpassed 1 trillion yuan in the first half of this year for the first time since 2008, representing 1.5 percent of all issued loans, according to the China Banking Regulatory Commission. However some Chinese banks are extending the amount of time a loan can be overdue for before they classify it as "bad", meaning the number of problem loans on their books could be higher. Loans that are overdue by more than 90 days, but not classified as impaired, increased 166 percent during the first half of the year among China's listed banks, UBS banking analyst Jason Bedford said in a note last month. For example China Minsheng Banking Corp's proportion of nonperforming loans (NPL) increased slightly to 1.36 percent at the end of June, from 1.17 percent in 2014, but its number of overdue but not impaired loans rose by more than 70 percent to 48.4 billion, representing 2.57 percent of all its loans. A China Minsheng Bank spokesman declined to comment on its overdue loan level. At Huaxia Bank, the volume of loans 90 days past due but unimpaired
KEY POINTS Bad loans up 30 pct in first half of 2015 Listed commercial banks raised US$57.6 billion in capital in 2014 “Big four” banks report earnings this week increased 289 percent, to 34 billion yuan, during the first six months of the year while its impaired loan ratio worsened only marginally to 1.35 percent. Still, the proportion of bad loans in China's banking system as a whole is still well below the level hit in the early 2000s, when the culmination of years of government directed lending meant the NPL ratio at some banks in excess of 20 percent. But back then China's fast growing economy enabled lenders to run down their bad debt levels relatively quickly. Now, with growth slowing, the chances of such a quick recovery look slim. "We foresee NPLs will continue to climb as the economy slows - no growth turnaround is foreseen in the near future," said Andrew Wood, the Singapore-based head of Asia country risk at BMI Research. Reuters
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October 28, 2015
Asia
Singapore c.bank says policy easings sufficient buffer for economy The central bank forecast the economy to grow at around 2-2.5 percent this year with risks tilted towards the downside Jongwoo Cheon
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ingapore’s central bank said its monetary easings this year were sufficient to reduce downside risks to economic growth, and expects inflation to pick up on the diminishing effects of lower oil prices. The trade-dependent economy is being pressured by sluggish global growth, but expectations of more aggressive stimulus at the October 14 policy meeting were “unwarranted,” the Monetary Authority of Singapore (MAS) said in its half-yearly macroeconomic review released yesterday. “An even stronger policy easing in the most recent October review, including flattening the slope of the S$NEER policy band, was clearly unwarranted,” the central bank said. “The Singapore economy was neither experiencing an outright retraction in economic activity nor widespread price declines.” At the October review, MAS eased policy for the second time this year by slightly reducing the rate of the Singapore dollar’s appreciation.
KEY POINTS MAS says Oct stronger easing calls “unwarranted” MAS maintains headline, core inflation forecasts MAS expects wage pressures to persist MAS sees downside risks to economic growth The move went against a section of the market expecting a bolder step, such as re-centring of its policy band, as the city state’s economy narrowly dodged a recession in the third quarter. Economic growth in Singapore and elsewhere in Asia has slackened off sharply as regional locomotive China cools and as factories struggle due to weak demand.
MAS manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (NEER).
Inflation to pick up
Core inflation is expected to rise next year to 0.5-1.5 percent from around 0.5 percent in 2015, the MAS reiterated. Core inflation, the focus of monetary policy, excludes private road transport costs and accommodation, which can be influenced more by government policies. Overall imported inflation should generally be benign, but food prices could rise as the El Nino weather pattern impairs harvest, the central bank said. MAS expects wage pressures to persist, but said headline inflation could remain negative in the first half of 2016 due to lower car prices and housing rentals, before picking up in the second half.
MAS maintained its forecast range for all-items inflation in 2016 at between -0.5 percent and 0.5 percent, compared to around -0.5 percent this year. The central bank forecast the economy to grow at around 2-2.5 percent this year with risks tilted towards the downside. Next year’s growth would be similar, it said. “The Singapore economy will be weighed down by weakness in the external-oriented sectors in the next few quarters,” the MAS said. A U.S. economic recovery has not stoked strong import demand, while slowing growth in China continued to take its toll on Asia, it added. Still, the central bank remained sanguine about the city state’s outlook. “Together with the policy easing in January 2015, the October policy move will be supportive of economic growth into 2016, while ensuring price stability over the medium term,” it said. Reuters
Australia rejects moratorium on new coal mines The country is considered one of the world’s worst per capita greenhouse gas polluters
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ustralian Prime Minister Malcolm Turnbull dismissed calls yesterday for a moratorium on new coal mines urged by influential citizens and Pacific leaders who say they contribute to global warming. Sixty-one prominent Australians, including rugby union’s David Pocock and Nobel Prize-winning scientist Peter Doherty, wrote an open letter to world leaders calling for coal exports to be on the agenda at upcoming UN climate talks in Paris. “Australia’s coal contributes to climate change, with its global health impacts,” they wrote in the letter published yesterday in The Sydney Morning Herald. The letter comes after the president of the Pacific state of Kiribati, Anote Tong, urged
a global moratorium on new coal mines and coal mine expansions to keep global warming below dangerous levels. Low-lying Kiribati, like many other Pacific nations, fears it will disappear beneath the waves without drastic intervention from major climate change contributors. Australia is a leading coal exporter with huge reserves of the mineral, which it plans to export to India and elsewhere with dozens of new coal projects under consideration. Turnbull dismissed the prospect that it would scale back its industry. “I don’t agree with idea of a moratorium on exploiting coal. With great respect to the people who advocated it, it would make not the blindest bit of difference to global emissions,” he told reporters.
With its heavy use of coal-fired power, Australia is considered one of the world’s worst per capita greenhouse gas polluters and the proposed emissions reduction targets it is taking to Paris have been criticised as inadequate. Turnbull, who plans to attend the Paris talks, said coal plays a large role in global energy production and would
likely do so for a long time, but he stressed the importance of having all energy options open. The government’s incoming chief scientist Alan Finkel said it was critically important that Australia reduce its carbon emissions. “My vision is for a country, a society, a world where we don’t use any coal, oil, or
natural gas because we have zero-emissions electricity in huge abundance,” Finkel said, standing alongside Turnbull. “But you can’t get there overnight. The best way to get rid of coal is to introduce alternatives that deliver value at a reasonable price rather than just arbitrarily turning it off.”
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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Business Daily | 13
October 28, 2015
Asia President Widodo says Indonesia intends to join TPP trade deal
Thai govt approves measures to help rice farmers
He finalized more than US$20 billion worth of U.S. deals during his trip
Thailand’s cabinet approved measures worth about 40 billion baht (US$1.13 billion) to help rice farmers, a government spokesman said yesterday. The government gave the green light to three measures to help rice farmers prepare for the next harvest, including credits and an interest rate reduction for farmers, Sansern Kaewkamnerd, a government spokesman, told Reuters. The measures come after growing criticism levelled at the military regime from rice and rubber farmers who have seen their income fall following the end of the subsidy schemes.
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ndonesian President Joko Widodo, speaking after a meeting with U.S. President Barack Obama, said his Southeast Asian country intends to join the Trans-Pacific Partnership trade deal the United States has forged with 11 other nations. “We are the largest economy in Southeast Asia,” Widodo said through a translator. “And Indonesia intends to join the TPP.” U.S. Trade Representative Michael Froman said the United States would keep sharing information about the TPP, which will set common standards on issues ranging from workers’ rights to intellectual property protection. More broadly, Indonesia had work to do on cutting red tape, addressing barriers such as local content and local packaging requirements, eliminating import and export restrictions and protecting intellectual property rights, Froman said. President Widodo finalized more than US$20 billion worth of U.S. deals during his trip, including a US$500 million infrastructure investment from Coca-Cola and up to US$1 billion from General Electric for Indonesia’s energy and healthcare
New Zealand looks to advance Pacific trade
US President Barack Obama (R) meets with President Joko Widodo of Indonesia in the Oval Office of the White House
sectors, according to the Indonesian embassy in Washington. Both deals were for a five-year period. Indonesia’s state oil firm Pertamina, and Corpus Christie Liquefaction, a subsidiary of Cheniere Energy, also finalized a shale gas deal valued at US$13 billion. Widodo and Obama also discussed climate change, strengthening
S. Korean manufacturers post first negative growth in 2014 But consumer sentiment index rose to its highest level in five months
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evenue among South Korean manufacturers posted the first negative growth last y e a r , indicat ing a slowdown in the economy’s main growth engine, central bank data showed yesterday. Revenue of local profit-making enterprises, including manufacturers, grew 1.3 percent in 2014 from a year earlier after rising 2.1 percent in the previous year, according to the Bank of Korea (BOK). It was based on the bank’s assessment of 530,641 profit-making companies, including 122,097 manufacturers. The subjects excluded insurers and financial firms. Sales in manufacturers shrank 1.6 percent in 2014, marking the first minus growth since the BOK began compiling the data in 1961. It was down from the previous year’s 0.5 percent increase. The negative increase was attributable to global weak demand for smartphones, produced by local tech firms like Samsung Electronics, and lower crude oil prices that reduced export prices of oil products. Revenue in the electrical and electronics sector tumbled 5.5 percent in 2014 after rising 3.8 percent in
2013, with those in the oil-refining and chemical industry sliding 1.6 percent last year after falling 0.7 percent the prior year. The ratio of operating profit to revenue for all companies declined from 4.1 percent in 2013 to 4 percent in 2014. The figure for manufacturers slumped from 5.3 percent to 4.2 percent in the cited period. The number of companies, which cannot afford even interest payment with operating profit, increased last year. The percentage of companies with less than 100 percent of the interest payment ratio, which measures the rate of operating profit to borrowing costs, was 32.1 percent of the total in 2014, up 0.8 percentage points from the prior year.
Consumption improving
On the other hand, finance ministry said yesterday that domestic consumption should continue to improve in the fourth quarter due to government measures, but exports were likely to remain weak. Bank of Korea data showed last week exports fell 0.2 percent in the third-quarter in sequential terms, contracting for the first time in a year.
Indonesia’s maritime security powers and forest fires in Indonesia. The Indonesian government said earlier on Monday Widodo would be cutting short his trip to the United States in order to address the “haze crisis” caused by forest fires. Widodo linked the fires to the effects of climate change felt by Indonesia. Reuters
The statement yesterday said there would likely be no “spending cliff” like last year when the government ran into an unexpected tax revenue shortage, and that consumer and investment sentiment have been rising. The ministry added it would focus its policies to bolster the recovery in consumption to make up for sluggish exports
Optimistic future
South Koreans have become the most optimistic in five months about future economic and living conditions, the central bank’s October survey showed yesterday, boding well for a sustained recovery in Asia’s fourthlargest economy. The Bank of Korea’s composite consumer sentiment index (CCSI) rose to 105 in October from 103 in September, climbing for the fourth consecutive month to its highest since May, when it also reached 105. A reading above 100 indicates consumers feel more optimistic about the future economic and living conditions. The index has been recovering from shocks rooted in the outbreak in late May of the deadly Middle East Respiratory Syndrome virus (MERS). This came as economists expressed doubts about the strength of domestic demand despite central bank data showing last week that the country’s economic growth picked up to a more than five-year high in the third quarter. The Bank of Korea’s survey also showed the median expected inflation rate for the next 12 months remained unchanged in October at 2.5 percent. The central bank said it surveyed more than 2,000 households in cities across the country between October 13 and 20. Xinhua and Reuters
New Zealand Associate Trade Minister Todd McClay will be looking to advance talks on a Pacific trade and economic agreement at talks in the Cook Islands this week. Pacific Trade Ministers meeting in Rarotonga would discuss the regional trade agenda, including advancing negotiations of the Pacific trade agreement, PACER Plus, McClay said in a statement yesterday. The Pacific Agreement on Close Economic Relations (PACER) Plus talks on regional trade and economic integration involve the 14 Pacific island states of the Pacific Islands Forum plus Australia and New Zealand.
Indonesia to decide on rice imports within two weeks Indonesia will decide within two weeks whether to ship in rice from Vietnam and other Asian countries, the head of the state food procurement agency said, as dry weather crimps local output and stokes domestic prices for the staple grain. Indonesia, which is battling dry weather caused by the El Nino weather pattern, already has a contingency plan in place to import rice from Vietnam if needed. Rice imports are a contentious issue in the country where President Joko Widodo is faced with fast-rising food prices but is also pursuing self-sufficiency in various foods to protect farmers.
Australian beef company sells stake to Chinese rival Australia’s Bindaree Beef Group said yesterday it sold a major stake to China-listed Shan Dong Delisi Food Co Ltd, seizing on a free trade agreement as the mainland seeks new markets to satisfy its rapidly growing appetite for meat. In a statement, Australia’s fourth-largest meat processor said it sold 45 percent of the company to Shan Dong for A$145 million (US$105 million), giving it access to the Shenzhen Stock Exchange-listed rival’s sales network which reaches some 700 million people. The deal will be an early test of whether a free trade agreement signed in June between Australia and China.
14 | Business Daily
October 28, 2015
International Slower growth in eurozone loans to private sector Growth of loans to the private sector in the euro area, a gauge of economic health, appears to be losing momentum again, European Central Bank data showed yesterday. After long months of contraction, the volume of loans to private businesses and households has returned to growth. But the rate of that expansion slowed last month, with the volume of loans increasing by just 0.6 percent in September compared with the same month in 2014, the ECB said in a statement. That is slower than the previous month when private sector loans had increased by 1.0 percent.
JPMorgan Chase building a rival to Apple Pay
JPMorgan Chase & Co said it will soon launch its own competitor to Apple Pay that will allow consumers to pay retailers using their smartphones in stores, and it has already won the endorsement of a major group of merchants. The largest U.S. bank is the latest company to try to profit from the prevalence of smartphones, which many financial executives believe will one day be consumers’ preferred way to pay for everything from milk and eggs at the supermarket to a rental car at an airport.
Oman fund takes Bulgaria to arbitration Oman’s biggest sovereign wealth fund has filed an arbitration claim against Bulgaria over the collapse of Corporate Commercial Bank (Corpbank), the online database of Washington-based International Centre for Settlement of Investment Disputes showed. Oman’s State General Reserve Fund, fund owned a 30 percent stake in Corpbank, which was Bulgaria’s fourth-largest lender before collapsing last year following a bank run. The bank collapse triggered the Balkan country’s biggest financial crisis since the 1990s, prompting Sofia to pay over 3.6 billion levs (US$2.03 billion) to guaranteed depositors.
BP shrinks further to weather extended oil slump BP announced yesterday a third round of spending cuts and more asset sales in the coming years to tackle an extended period of low oil prices after third-quarter profits slumped. The British oil and gas company has already sold nearly US$50 billion in assets since the deadly 2010 Gulf of Mexico spill and said yesterday it was expecting an additional US$3-5 billion of divestments in 2016. Oil companies have been aggressively cutting spending and operating costs over the past year to deal with the sharp drop in cash flows due to lower oil prices.
U.K. economy expands less than forecast Compared with a year earlier, GDP expanded 2.3 percent compared with 2.4 percent in the second quarter Jennifer Ryan
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.K. economic growth cooled as manufacturing contracted for a third quarter and construction shrank the most since 2012, a sign that Britain may be falling prey to global headwinds. Gross domestic product expanded 0.5 percent in the three months to September from the previous period, when it grew 0.7 percent, the Office for National Statistics (ONS) said in London yesterday. The median estimate in a Bloomberg News survey of economists was 0.6 percent. Construction shrank 2.2 percent, manufacturing contracted 0.3 percent, while overall production growth cooled to 0.3 percent from 0.7 percent in the second quarter. Growth in services, the biggest share of the economy, accelerated to 0.7 percent from 0.6 percent in the second quarter, led by business services and finance. The report may signal that the emerging-market slowdown has damaged prospects for Britain’s expansion. Bank of England Governor Mark Carney, who has previously said the timing for the first step to tighten policy will become clearer around the turn of the year, said Sunday that if increases aren’t needed, officials won’t act. The ONS report is the first of three estimates and may be revised, as it’s
Construction shrank 2.2 percent
based on about 44 percent of the information that will ultimately be available. “While growth has slowed from the previous quarter, the economy overall is still expanding steadily,” said Joe Grice, the chief economist at the ONS. “The sectoral pattern is mixed. Growth in the services sector has been robust but both manufacturing and construction output have shown falls.” Compared with a year earlier, GDP expanded 2.3 percent compared with 2.4 percent in the second quarter. Output is now 6.4 percent above its pre-recession peak.
Debt limit, budget deals take shape in U.S. Congress Any fiscal deal would have to be approved by the full House and Senate before being submitted to Obama Richard Cowan
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.S. House Speaker John Boehner and other congressional leaders raced to finalize a sweeping two-year budget deal and an extension of the federal debt ceiling until March 2017 before Boehner transfers power to his expected successor, Paul Ryan. If successful, the deals would mark a final act for Boehner to clear some politically divisive legislation as Ryan takes over as speaker assuming a majority of the House of Representatives votes to put him in the top job in an election set for Thursday. Boehner is set to retire from Congress on Friday. “We’ve had the outline of the deal offered to us, we’re now awaiting to get the details,” Representative Darrell Issa said at the end of a closeddoor meeting of House Republicans.
By negotiating a two-year budget deal, congressional leaders and the White House may be acknowledging that they will not be able to craft a comprehensive, longer term deficit-reduction package during the remainder of Barack Obama’s presidency. Central to the pact is the easing of across-the-board budget caps allowing an additional US$80 billion in spending over two years, split evenly between military and domestic programs. About US$50 billion in added spending would come in fiscal 2016, which started on October 1, and US$30 billion would be added to the fiscal 2017 budget. Another US$32 billion in offbudget war funding is envisioned over the two years. The deal also would prevent a spike in Medicare Part B insurance
The Bank of England will publish new growth and inflation forecasts on November 5, alongside its policy decision and minutes showing how each of the nine-member panel voted. So far only one official has voted to increase the key rate from its current record-low 0.5 percent, while global headwinds and low inflation prospects stay the hand of the remainder. “Official industrial production and construction output data up to August have been awful,” said Samuel Tombs, an economist at Pantheon Macroeconomics in London. Bloomberg News
premiums for doctor visits and lab tests. The added spending would be offset by more than US$168 billion in long-term savings from reforms to the Social Security Disability Insurance program, according to a person familiar with the negotiations. Details on those changes were not yet available. Congress faces a November 3 deadline to extend the U.S. Treasury’s authority to borrow, or risk a default on federal obligations as cash runs short. The Treasury has already postponed an auction of two-year notes originally scheduled for October 27. Founding members of the conservative House Freedom Caucus told Reuters there was no time left to stop a debt ceiling deal pushed by Boehner and they would focus on future fiscal deadlines. Even with a two-year budget deal, Democrats and Republicans still could fight over how the money would be divided among various programs. There also could be pitched battles over possible Republican attempts to add “riders” to the spending measure, such as ending federal funding for Planned Parenthood because of its abortion practices. Ryan, if elected speaker, will face the challenge of finishing a spending bill by a December 11 deadline or face the prospect of government shutdowns. U.S. borrowing authority would extend to March 2017, weeks after the next president is sworn into office. Reuters
Business Daily | 15
October 28, 2015
Opinion Business
wires
Big Oil, Big Tobacco, Big Lies
Leading reports from Asia’s best business newspapers
NEW ZEALAND HERALD New Zealand’s trade deficit widened unexpectedly last month as dairy exports declined and imports remained stronger than anticipated. Statistics New Zealand said the trade deficit widened to NZ$1.22 billion in September, from NZ$1.08 billion in August, larger than the NZ$825 million deficit forecast by economists. That compares with a NZ$1.36 billion deficit in September last year. The country’s exports rose 2 percent to NZ$3.69 billion in September, lagging behind the NZ$3.9 billion expected by economists. Shipments of meat and edible offal rose 33 percent to NZ$438 million from the year earlier, led by frozen beef.
INQUIRER.NET The local IT and business process management industry is pegged to overtake overseas Filipino workers remittances in the next two years, according to the Information Technology and Business Process Association of the Philippines. In 2014, the industry earned US$18.9 billion in revenues and is projected to end 2015 with US$21.2 billion, proving that the industry remains the largest and fastestgrowing industry in the country with a growth of 15% to 18% every year, employing over 1 million Filipinos in 2014. The figures of the country’s “sunshine industry” were once again celebrated at the 7th International IT-BPO Summit.
Kelle Louaillier
President of Corporate Accountability International
BANGKOK POST The Thai government on Monday kicked off its “Prime Minister Meets CEOs” series, starting with the automotive, electronics and electrical appliance sectors in the country’s latest effort to restore confidence among foreign investors. Prime Minister Prayut Chan-o-cha led a meeting of economic ministers -- Deputy Prime Minister Somkid Jatusripitak, Finance Minister Apisak Tantivorawong, Industry Minister Atchaka Sibunruang and Commerce Minister Apiradi Tantraporn -- with chief executives from Mitsubishi Motors (Thailand), AutoAlliance (Thailand) or AAT, Seagate Technology, Mitsubishi Electric Consumer Products, Thai Samsung Electronics and HGST (formerly Hitachi Global Storage Technologies).
THE PHNOM PENH POST Cambodia’s largest bank Acleda Bank announced its third quarter results for 2015, reporting US$27.06 million in profit for the quarter, up almost 50 per cent as compared to the same period last year. Profit for the first nine months of the year reached US$79.5 million, registering a 46 per cent increase year-on-year. The bank has continued to increase its deposit base, with customer deposits now reaching US$2.24 billion as of September 2015, while loans and advances given out by the bank were US$2.35 billion during the same period.
Bill McKibben
Scholar in environmental sciences at Middlebury College and a member of the American Academy of Arts and Sciences
O
ver the last few years, a growing number of people have been taking a hard look at what is happening to our planet – historic droughts, rising sea levels, massive floods – and acknowledging, finally, that human activity is propelling rapid climate change. But guess what? Exxon (now ExxonMobil) had an inkling of this as early as 1978. By the early 1980s, Exxon scientists had much more than an inkling. They not only understood the science behind climate change, but also recognized the company’s own outsize role in driving the phenomenon. Recognizing the potential effects as “catastrophic” for a significant portion of the population, they urged Exxon’s top executives to take action. Instead, the executives buried the truth. There may be a silver lining to this infuriating story: the recent investigation that exposed Exxon’s deceit could end up catalysing the action needed to address the looming climate crisis. After all, similar revelations about the tobacco industry – what the major cigarette companies
knew and when they knew it – transformed the public-health landscape. In 1996, a series of lawsuits forced tobacco companies to release millions of internal documents, which confirmed what public-health advocates and policymakers had long suspected: as early as the 1950s, the industry knew that nicotine was addictive and that cigarettes caused cancer. But, to protect its own interests, Big Tobacco deliberately misled the public, doing everything possible to cast doubt on scientific findings that it knew to be accurate. Such tactics enabled the industry to delay, for more than 50 years, regulation that could have saved millions of lives annually. After the revelations, however, it was clear that the tobacco industry was a malevolent force that did not belong in the policymaking process. With Big Tobacco out of the picture, and armed with evidence of the real effects of tobacco consumption, health advocates were finally able to compel their governments to act. In 2003, world leaders agreed to the Framework Convention on Tobacco Control (FCTC), negotiated under the auspices of the World Health Organization. Today, the treaty covers 90% of the world’s population and has contributed to a significant decline in sales for global tobacco corporations. Over time, it will save hundreds of millions of lives (and save governments’ health-care budgets huge sums). Big Oil, it is now clear, has been following Big Tobacco’s playbook. In 1997, almost two decades after it began studying climate change, it quashed its research, claiming that climate science was “far from clear” and thus that it did not “support
Even after the international community adopted the United Nations Framework Convention on Climate Change in 1992, the fossilfuel industry managed to block meaningful progress
mandated cuts in energy use.” Beyond suppressing its own findings, ExxonMobil (and its peers) funded and promoted junk science and attacked scientists who warned of the impending climate disaster. The fossil-fuel companies’ approach was so effective that the media are only now beginning to recognize the leading role the industry played in creating – almost out of whole cloth – the so-called “climate debate.” But perhaps Big Oil’s biggest success was diminishing the political will to implement appropriate regulation. Even after the international community adopted the United Nations Framework Convention
on Climate Change (UNFCCC) in 1992, the fossil-fuel industry managed to block meaningful progress – to the point that, if serious action is not taken soon, the entire process could unravel. In Europe, Royal Dutch Shell’s lobbying so diluted the European Union’s efforts that there are now no binding targets for renewables or energy efficiency for individual countries. The company even sent a letter to the European Commission’s president claiming that “gas is good for Europe.” Shell and other oil companies are now promising to work as “advisers” to national governments on how to deal with climate change. Just as the tobacco files drove the tobacco industry out of policymaking processes, the Exxon investigation should compel world leaders to eliminate the fossil-fuel industry from efforts to solve the climate crisis. After all, no policy can succeed if those who shape it are betting on its failure. The turning point for tobaccorelated public-health policy came when the industry’s depravity became indisputable. Now, that moment has come for the climate movement. We cannot simply hope that the fossil-fuel industry will change its ways. As an alliance of human-rights groups, environmental activists, and corporate-accountability advocates already is demanding, we must kick the industry out of the policymaking process altogether. Exxon’s scientists were right: the effects of climate change on many communities are catastrophic. With so many lives at stake – and such clear evidence of the threat – Big Oil, like Big Tobacco before it, should be treated for what it is: Big Trouble. Project Syndicate
16 | Business Daily
October 28, 2015
Closing Hong Kong-mainland trade slumps
China tops Asian outbound capital in real estate
The Chinese mainland’s trade with Hong Kong totalled US$231.92 billion in the first nine months of 2015, down 11.5 percent year on year, the Ministry of Commerce announced yesterday. This accounts for 7.9 percent of the mainland’s total overseas trade in the same period, the ministry figures showed. The mainland’s exports to Hong Kong hit US$224.29 billion, a decrease of 11.5 percent year on year, while the mainland’s imports from the region dropped 13.1 percent to US$7.62 billion. Hong Kong is the mainland’s fourth-largest trade partner and third-largest export market.
Asian investors accounted for nearly 20% of global outbound cross-border investment in commercial real estate (CRE) in the first half of 2015, with China top in the region, said a report by CBRE yesterday. China’s outbound CRE stood at US$6.6 billion in the first six months, followed by Singapore’s US$4.4 billion and US$2.2 billion from Hong Kong. On a global basis, China is the 4th largest source of cross-border capital in commercial real estate, after the United States, Canada and Germany, according to CBRE, the world’s largest commercial real estate services and investment firm.
Blackstone in talks to buy stake in Taipei 101 tower operator Taiwanese media had said then that part of the government’s opposition to the deal was based on suspicion that Chinese funding was involved in that bid Faith Hung
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rivate equity firm Blackstone is in talks to buy a nearly 38 percent stake in the operator of the Taipei 101 tower, people with direct knowledge of the matter said, in a deal that could be worth up to US$700 million. The U.S. firm has assured the Taiwan government it will not use Chinese-backed money to buy the stake in the Taipei Financial Center Corp (TFCC), two sources said yesterday. TFCC’s Taipei 101 is among the 10 tallest buildings in the world. The stake will be sold by Taiwanese food conglomerate Ting Hsin International Group. “Blackstone has checked the private equity fund it would use to buy the potential stake. No Chinese investors are in this fund,” said one of the sources. “I have provided them a certification.” Blackstone’s move to
Taipei 101 tower
check funding sources underscores the Taiwan government’s concerns that the island’s economy will be
China’s pension funds ready for stock investment in 2016
overly influenced by Chinesebacked capital. Taipei and Beijing remain political foes even though cross-strait trade
ties have improved to their warmest level in more than six decades since President Ma Ying-jeou took office in 2008. China sees Taiwan as a renegade province, and has vowed to take it back by force, if necessary. Malaysia’s IOI Properties Group backed out of a proposal in March to buy a 37.17 percent stake in TFCC for US$751 million after the Taiwan government said it was opposed to foreign control of the landmark skyscraper. Taiwanese media had said then that part of the government’s opposition to the deal was based on suspicion that Chinese funding was involved in that bid. TFCC will hold a board meeting today to decide on whether to give Blackstone access to its books for due diligence, the people added. The U.S. firm could then
Vanke says Q3 net profit up as sales pick up
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make an offer to buy the 37.17 percent stake in a deal estimated by analysts to be worth up to US$700 million. An external spokeswoman for Blackstone in Hong Kong declined to comment. Ting Hsin officials could not be reached for comment. The sources declined to be identified as the discussions are confidential. The potential deal will probably get the green light from the finance ministry, TFCC’s controlling shareholder, said one of the sources, adding that given Blackstone’s good reputation, the ministry would approve the deal if there are no special negative circumstances. When contacted, an official in the finance ministry said the ministry would “totally respect TFCC’s board decision”. The official declined to elaborate further. Reuters
Vietnam jails officials for Japan aid graft scandal
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ainland’s pension funds will be ready for investment in stocks and equities in 2016 after the government sets rules to regulate the change, the Ministry of Human Resources and Social Security said yesterday. China’s cabinet, the State Council, finalized guidelines in August allowing pension funds to invest in higher-return products, including stocks and equities. The funds were previously parked in banks or invested in treasury bonds with low yields, provoking calls for change as the country faces increasing challenges in caring for its growing elderly population. To minimize risk, the guidelines restrict the proportion of funds invested in stocks and equities to 30 percent of total net assets. Provincial-level governments determine the amount to be invested, and only institutions authorized by the State Council can manage and invest the funds. Around 2 trillion yuan (US$315 billion) of the funds’ total assets can be invested in various products, said You Jun, vice minister of human resources and social security, in August.
hina Vanke Co Ltd said yesterday its thirdquarter net profit jumped 21.8 percent as sales picked up, bolstered by government policies to rev-up the key housing sector. China’s largest residential developer by sales yesterday reported a net profit for the July-toSeptember quarter of 2 billion yuan (US$314.9 million), up from 1.65 billion yuan a year earlier. For the first three quarters of the year, net profit rose 6.1 percent to 6.9 billion yuan. In a statement, Vanke said it had already completed half of its full-year target for project area in the first nine months and the construction completion will accelerate in the fourth quarter, which would mean it would exceed that target. China’s government has since the third-quarter of last year launched several policies to support the housing market, which is key to rev up economic growth. These measures include cutting interest rates on Friday for the sixth time in less than a year. Official data last week showed home prices in China rose for a fifth consecutive month in September, indicating a mild recovery in the market.
ietnam jailed six railway officials for up to 12 years each yesterday, a court official said, over their roles in a corruption scandal that saw Japan temporarily suspend official development aid. The six defendants, all former officials at the Vietnam Railways Corporation, were found guilty of taking bribes of up to US$490,000 dollars from a Japanese consulting firm, the clerk told AFP. Japan, one of the largest donors to the communist country, suspended official development aid in March 2013 after the head of Tokyo-based Japan Transportation Consultants (JTC) admitted to bribery. Tamio Kakinuma told Japanese prosecutors he paid some 80 million yen (US$790,000) to Vietnamese officials to win work on Hanoi’s future over ground rail link, a project worth some 4.2 billion yen. On Tuesday, after a two-day trial in Hanoi, Dong was sentenced to seven and a half years in jail, while the man accused of masterminding the corruption scheme was given a 12-year sentence, the clerk told AFP. In December 2008, Japan suspended aid to Vietnam for four months during a similar scandal.
Xinhua
Reuters
AFP